Recs.
Updated
Redactor is a javascript program that helps you to create word-processed texts on the web. Redactor uses the jQuery library. It costs $100 for the dev license, but the quality of the editor is more than worth it.
They have a live demo and more information on their website
Specs
Pros
Pro Very expandable with a well implemented API
If you require it to be even more flexible don’t forget that you can use our clear API and callbacks in almost any situation.
You can also expand the functionality with the existing plugins listed here and even create your own.
Pro Interface and interactions are clean and robust
Play with the editor to prove it for yourself and see all the testimonials here.
Pro Excellent sanitisation of word and HTML pastes
Go to the editor and test the automatic sanitisation of word/html inputs.
Pro "Air Mode" lets you create really clean edit areas
Redactor supports a floating edit bar that appears when the user selects the text they want to format. It's really nice if you have trained users and want a cleaner interface. You can also easily modify what icons you want to show. See a demo here.
Cons
Con Unable to resize images
Users must prepare their pictures before uploading. It's not very simple for most people.